Pilot programme finds taxonomy boosted green investment in Australia, as Canadian groups urge Ottawa to adopt similar fossil-free approach
The Australian Sustainable Finance Institute has published an analysis of its green taxonomy pilot programme, suggesting Australian superannuation funds have benefited from a systematic understanding of which investments are considered green in order to achieve their climate goals.
After the taxonomy was first published last June, the ASFI began a pilot programme with 11 financial institutions including banks, super funds, asset managers and credit agencies.
The taxonomy helped the financial institutions create green investment opportunities, the report concludes.
Its authors note that one of the piloting institutions, the ANZ Bank, supported two energy clients in using the taxonomy to establish green financing, including a Victoria Power Networks A$750mn ($525mn) green bond and an SA Power Networks A$300mn green bond.
The super funds in the pilot, Rest and Hesta, both say the taxonomy helped enhance their ability to place green investments.
“The pilot supported more consistent internal discussions and helped identify where further clarity or data may be required,” the ASFI case study on Rest says. “It also highlighted the challenges of applying activity-level criteria in an equity investment context.”
“Throughout the pilot, Rest gained insights into how the taxonomy could be used as an additional climate-related lens to support investment analysis alongside existing investment processes,” said a spokesperson for Rest in a statement to Sustainable Views.
Hesta’s climate investment goals will continue to be guided through the taxonomy, the ASFI case study says.
“The taxonomy will likely provide an uplift in measuring and reporting these types of allocations with better understanding of what can be classified as climate mitigation activities,” the case study on Hesta says.
“The taxonomy is a valuable tool for investors and governments, private and public sectors, policymakers and corporates,” Hesta said in a statement published alongside the report. “When adopted broadly, it will result in a universal language and a shared framework that links different parts of the capital value chain.”
Model for Canada
Last week, Canada’s taxonomy council published a draft proposal for its initial green taxonomy.
The proposal allows for investments in upstream oil and gas activities focused on carbon abatement or decarbonisation. The move has drawn the ire of sustainable finance and environmental groups alike.
Think-tank the International Institute for Sustainable Development says Canada should follow Australia’s example on excluding all oil and gas investments in the taxonomy.
“Inclusion of oil and gas activities in a taxonomy is simply not on a Paris-aligned path,” says Jessica Kelly, senior policy adviser at the IISD.
Given that Australia is also a fossil fuel producer and middle power, Canada has a good model to follow, she tells Sustainable Views.
“Australia provides a really strong case for Canada to have ambition with its sustainable finance taxonomy,” she says.
Credible Taxonomy Canada, a coalition of 34 sustainability non-profits, public interest groups and academic centres, published the Taxonomy Fossil Fuel Conflict paper on July 2, suggesting that the inclusion of oil and gas companies under the abatement category poses a credibility problem for the taxonomy.
“A fossil-fuel-free taxonomy, as has been developed in Australia, is the right direction to achieve climate progress in Canada,” the report says.
Despite Australia’s taxonomy including some references to abatement, Australia in effect established a fossil-free taxonomy by setting eligibility thresholds that those projects could not practically meet, says Adam Scott, executive director of the climate advocacy group ShiftAction.
“We need something a bit simpler and cleaner, and Australia is closer to that model,” he tells Sustainable Views.
He adds that Canada’s draft proposal falsely assumes that investments in oil and gas businesses, with proceeds earmarked for eligible abatement activities through the green taxonomy, can be easily tracked.
“You can’t ringfence or trace the financing,” he says.